Lisa Gibbs

Lisa Gibbs

Lisa Gibbs covers real estate and insurance for MONEY. She lives in Fort Lauderdale, and comes from a long line of hardy Florida Keys pioneers whose homes occasionally blew over during hurricanes. Before joining MONEY, she was Business Editor at The Miami Herald. She's also a book nut and sci-fi geek.

The Cities Where Zombies (Foreclosures, That Is) Are Still Lurking

They’re the housing market menace that won’t seem to go away – homes abandoned by their owners, not yet taken over by the banks. Even now, well into a two-year recovery in home prices, there remain 141,406 “zombie foreclosures,” according to data firm RealtyTrac.

That’s down 16% from a year ago nationwide, which sounds pretty good. Still, zombie foreclosures increased this quarter in 10 states plus D.C. The problem is particularly persistent in some regions—Florida accounts for more than one-third of all zombies—where upwards of 30% and even 40% of foreclosures are vacant.

Metropolitan areas (keep in mind, these are generally much larger regions than cities themselves) with the highest percentage of vacant foreclosures, reports RealtyTrac:

Metro Area

%Vacant

Homosassa Springs, Fla.

43%

Portland

37%

Birmingham

37%

Ocala, Fla.

36%

Destin, Fla.

35%

St. Louis

34%

Worcester, Mass.

33%

Port St. Lucie, Fla.

33%

Punta Gorda, Fla.

33%

Binghamton, N.Y.

33%

Las Vegas

32%

Melbourne, Fla.

32%

Daytona Beach, Fla.

32%

Gainesville, Fla.

31%

Fort Wayne, Ind.

31%

Vacant foreclosures were a downright plague during the worst of the housing crisis—homes overgrown with weeds, windows boarded up dragged down property values and in some cases deteriorated into hotbeds of crimes. From a 2008 U.S. Conference of Mayors report: “These properties are a drain on city budgets. They detract from the quality of life, as well as the economic opportunities, of those living around them. They are an impediment to individual neighborhood redevelopment and, ultimately, to achievement of city-wide economic development goals.”

Five years later, a swarm of local and national initiatives and streamlined foreclosure procedures have helped; so has a flood of investor buying. Rising home prices and an improving economy have kept fewer homes out of foreclosure in the first place.

Still, real estate analysts and community advocates fear that the last batch of zombies are going to be the hardest to kill—they may be in the worst shape and in the least desirable neighborhoods. Investors don’t want them, and the properties require way too much work for traditional buyers.

And, community redevelopment types fear, banks are taking their sweet time foreclosing on them at all, putting off the moment when they have to pay all the back taxes, code enforcement fees and other liens that have amassed over the years.

“The banks are hoping the market will keep turning around, or they’re looking for alternatives that lessen the red ink on their portfolio,” says John Taylor, CEO of the National Community Reinvestment Coalition. “There was a time the banks were just giving away these properties trying to get them off the books. Now, they don’t want to add to that.”

Not surprisingly, the longer the foreclosure process lasts, the more likely the owners are to abandon the homes. And where are foreclosures taking the longest? New York and Florida, a 418 and 411 days on average, respectively, followed by New Jersey (378 days), Illinois (272) and Hawaii (249).

Why Median Home Prices Are Rising: It’s More Than Just the Values

Home prices keep rising, but not just because they're worth more. Sales of higher-end homes are skewing that median home price figure upward.

The median home price rose 5.1% to $213,400 from a year ago, the National Association of Realtors announced yesterday.

RealtyTrac’s numbers out today, which include foreclosures sales not covered by the NAR report, have median prices up 13% year-over-year.

So does that mean your home value rose 13%?

Of course not, and not just because those figures cover the entire United States. Clearly home values vary widely based on the characteristics of your local market – employment growth, the pace of new construction, incomes, type of home, all sorts of things.

The median home price is shaped by other factors having nothing to do with any particular home or market but, rather, the specific mix of homes sold in that month.

One of the trends we’ve been seeing for a while now is that more higher-priced homes are selling than lower-priced homes. That’s for two reasons:

First, the volume of bargain-priced foreclosures continues to shrink. RealtyTrac’s report says foreclosures and short sales accounted for 14.3% of home sales in May, down from 15.9% a year ago. Consider that the median price of distressed homes was $120,000 versus $190,000 for non-distressed and you can see how simply having fewer troubled properties in the mix would be a powerful pricing boost.

Second, move-up buyers, the ones buying the $500,000-plus homes, are in better financial shape. They have the credit scores to qualify for a mortgage. They also have, more than likely, equity in their current home they can use for a new down payment as well as investments.

See what’s happening at RealtyTrac’s chart of home sales by price tier:

The number of homes on the market increased enough to slow down surging price gains and make it a little bit easier for buyers. Bidding wars aren't going away, though.

Home buyers worried they will be stuck in bidding wars for a scarce number of homes can relax a little bit. The number of homes for sale in May is up 6% over last year, to 2.28 million, reported the National Association of Realtors.

At the current pace, it would take 5.6 months to sell all the homes on the market. Six months is considered a healthy balance between buyers and sellers. The 5.6 number means it’s still, on average, more of a sellers’ market, but far better than late 2012 and early 2013, when there was less than a five-month supply of homes.

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For May, sales continued to strengthen after a “lackluster” first quarter, said NAR economist Lawrence Yun. The median price of existing homes for the country, which includes condos, was $213,400, up 5.1% over a year ago.

But let’s get back to inventory, which has been driving much of what’s been happening in housing.

Around late 2011, buyers began tiptoeing back into the market, eating into the oversupply of distressed properties that had swelled post-bust. A year later, more confident buyers and an investor boom pushed the pendulum toward housing shortage. This chart shows that trend and how it’s been easing so far this year.

This is great news, because in some cities buyers have become so frustrated by the scarce choices that they’ve given up. Especially in hot cities (Denver, all the big cities in Texas, southern California) and in the best neighborhoods in most cities, buying a home has become about how to win a bidding war.

Even now, homes are still selling relatively quickly—the median number of days a home spent on the market in May was 47. But at least that’s six days more than a year ago, giving buyers some room to breathe.

That in turn means a slowdown in the hefty price gains that have marked the last 18 months or so of the housing recovery, but the market needs more, Yun says. “Rising inventory bodes well for slower price growth and greater affordability,” he said in a statement. But “new home construction is still needed to keep prices and housing supply healthy in the long run.”

New construction is a bit wobbly, however. Yes, builders are building more homes, but they are mostly apartments (the rental market is still going gangbusters). Builders have been slow to commit, worried about the financial health of buyers. Economist Brad Hunter of MetroStudy, which analyzes the new home industry, says consumers are still skittish, but traffic through builders’ showrooms continues to improve. So sales should rise soon, he says.

As with everything real estate, it’s all local. Construction is healthy in southern California, Texas and Florida, while Arizona and Nevada are down, Hunter notes.

And, it matters where you fall on the income spectrum. That’s another key aspect of the current housing market: Pricier homes are selling better, while the market for first-time home buyers is depressed. The percentage of first-time home buyers in the existing-home space fell again in May, to 27%, according to NAR.

In new construction, builders have begun targeting young buyers with lower-priced homes, but Hunter sees too many obstacles: high student loan debt and low employment among millennials.

Another obstacle: lending standards. The credit score needed to get a mortgage has been trending down, but very slowly. Real Estate Economy Watch, writing about an Ellie Mae report, said 32% of closed loans had an average credit score of under 700 in May, compared with 27% a year ago. The median credit score for purchases (not refinances): 755.

The median scores for FHA loans fell to 684 from 695 last year–FHA loans are favored by first-time buyers because of low down payment requirements.

The trend should draw more potential buyers off the fence, says Cameron Findlay, chief economist for Discover Home Loans. “When everyone’s talking about how difficult it is, if you’re a borrower on the cusp, you don’t bother going through the hoops and trying to apply, you just stay back,” he says. “Now they’re saying, ‘Let me see.’”

Before you call the contractor and start picking out float toys, let’s make sure you know what you’re getting into.

The average in-ground swimming pool costs $21,919, according to home improvement site Fixr. And that’s for a pretty basic 32’ by 16’ model. (Eleven years ago, we spent about $24,000 on our pool plus that pavered patio.)

But that’s just to build the thing. Then you have to take care of it.

Not only are we basically lazy people, my husband and I learned that keeping a pool clean and clear is actually tricky business. After a few too many “Ooh, why is your pool water green” comments (we have a salt pool, so no algae-killing chlorine), we gave in and 911-ed the pool service company.

Cost: $85 a month, plus an extra $1,000 or so a year for annual maintenance items (new filters, etc.) Then there’s the pool vacuum we had to replace last year ($600) and now we’re dealing with frequent leaks. At 11 years old, our pool needs resurfacing—that’ll be $2,500 please.

Oh yeah, and then there’s the patio furniture we need to replace (the Florida heat, storms and salty air is hell on outdoor surfaces), the new layer of sand we need to throw on the patio every year or so and the outdoor sound system we “had to have.” Finally, a pool pump and, if you go that way, a heating system will absolutely up your utility bill, and it will almost certainly bump up your homeowner insurance premiums because of the increased exposure to liability.

But at least we’ll get our money back when we sell our home, right?

Well, not so fast.

Remodeling surveys and real estate agents seem to agree: A swimming pool is probably a wash in terms of cost vs. value, and it depends on the area.

In sunny states like where I live, a pool is practically standard equipment for any family-size home. If every house on the block has a pool, the lack of one will subtract from a buyer’s perception of value.

That said, even in Florida, some buyers are wary either of safety issues—especially if they have very young children—and the maintenance costs. Massachusetts agent Kimberly Kent sums up the annoying ambiguity of it: “A pool is a great selling feature for those buyers who want one, and a major detractor for those who are absolutely against one.” See other agent comments on this Zillow thread.

In northern climes, a pool is a tougher sell. As agent and Zillow consumer expert Brendon DeSimone told me, it’s “too specific.” Meaning, it’s uncommon enough that buyers don’t expect it and are more likely to run away from the costs and effort.

One sign of a pool’s popularity in your area may be the sheer number of pool service companies: Check out Porch’s take on the top and bottom “pool-loving states.” A few of them are a bit head-scratching: Wyoming? Really?

Clearly, “value” goes beyond money recouped in a home sale.

When we put in the pool, our kids were 7 and 5 years old, respectively. The pool provided a lot of easy entertainment on a lot of slow summer days, not just for the two of them but for their gazillion closest friends. Now that they’re surly teens, guess how many times they’ve gone in the pool lately? Yeah, exactly zero. Still, we got years of pleasure out of it and still do.

Nothing beats being able to splash in my pool at the end of a hot day (well, at least after the afternoon thunderstorm passes) and, at the very least, my lovely backyard provides a nice mental oasis to stare at when I need a break from my office and the incessant demands of my slavedriver bosses.

I’m confident that my own thousands of dollars has been money well spent. But I’m also looking forward to the day when I can stop paying the pool guy and just do my swimming in places like these: World’s Coolest Hotel Pools

Selling An Upscale Home? You’re in Luck. Sales Remain Strong.

Sales of higher-priced homes continue to outpace the lower tier, according to April figures. Check out our tips for buyers, sellers and owners.

If you’re trying to sell a home priced above $500,000, you’re in luck. Demand for those upscale homes keeps humming along, at least for now, according to National Association of Realtor figures for April.

Sales in the lowest price tier fell by 12% while sales in higher-priced categories were up by 0 to 5% from a year ago, wrote Danielle Hale, NAR’s director of housing statistics, on the association’s economists blog. The share of home sales above $500,000 or more rose from 10.8% to 11.6%.

Part of the reason for the disparity is that there are fewer lower-priced homes on the market. Investors and first-time buyers already have snapped up most of those properties; price gains have pushed homes into upper tiers as well.

Hale noted that the trend is slowing. In April of last year, for example, sales then of homes in the $500,000-$750,000 tier were up 33.6% from April 2012. This year, the gain was just 0.3%.

For now, generally the higher-priced homes within a town are selling better. How you’ll know if your home is in the top tier: Check Zillow’s Local Info page for your town. There you’ll find the median home values for the low, middle, and top price tiers in your market. Then, gauge the strength of your specific tier by asking your agent for the inventory and days-on-market stats for homes in your range.

Trying to sell an upscale home? Or buy one? Check out these tips:

BUYERS

Time it right. Want a more expensive home? Buy now before prices climb. However, if you live in a pricey house but are looking to downsize to something less expensive, it may be worth waiting for your current home to appreciate.

Look at jumbos. Will you need a large mortgage (typically more than $417,000)? The premium over what you’d pay for a smaller loan, which grew as wide as two full percentage points during the bust, has shrunk to next to nothing. Big banks often offer the best rates and options on these types of loans, says Keith Gumbinger of mortgage publisher HSH.com.

Don’t dismiss ARMs. While rising rates are a very real risk, ARMs at least deserve a look if you’re taking a big loan, says Gumbinger.

Buy for the future. Nearly 25% of owners regret the size of the home they picked, according to a Trulia study. With prices expected to climb, high-end homes are likely to be more affordable than they will be in the future, so think about how much space you’ll need in the coming years and buy appropriately.

Don’t go it alone. A recent study found that buyers of homes priced at more than $300,000 are more likely to try to negotiate the deal themselves than buyers of more moderately priced properties, says co-author Bennie Waller, professor of finance and real estate at Longwood University. It doesn’t end well: The DIYers end up paying an average of 9% more than those who use their own agent.

SELLERS

Price carefully. With sales of higher-end properties picking up, homes are increasingly “stigmatized if they stay on the market too long,” says Judson Henderson, a broker in Princeton, N.J.

Overprice, and your place could be the one with the black mark. If you’re unsure, pay the $500 or so for an appraisal. Also, if your home is older than 20 years, get an inspection to make sure your structure is sound, and your HVAC, plumbing, and electrical systems function smoothly. Fix whatever’s on the fritz. “You don’t want people feeling like the house is a project,” says Henderson.

Make your listing tech-friendly. Most shoppers, and particularly those in the market for upscale houses, will be looking at your home on phones and tablets, says Amy Bohutinsky, chief marketing officer at Zillow. Photos on these gadgets need a higher resolution than what’s required by a desktop. Check your listing on a mobile device to make sure it looks great. Some buyers may look at photos of your home on Google, so you should do the same (type your address into the map search, then click on the Street View tab). If the photo is outdated or taken in winter, note that in your listing.

Highlight the right features. According to a study by the National Association of Home Builders, buyers who expect to pay at least $500,000 today put warming drawers, wine fridges, and outdoor kitchens high on their wish lists. If your home has these or other unique selling points, mention them in your listing.

OWNERS

Renovate sooner, not later. Don’t let dated features drag down the value of your home. Owners thinking about remodeling have good reason to act now. Quality contractors, already busier than they have been in recent years, are likely to get even tougher to snag. Then there’s the issue of rising rates, which would push up the cost of new home-equity loans and most lines of credit.

But cash really rules when it comes to condos. More than half – 56% – of all condo sales were for cash in the first quarter versus 38% for homes, RealtyTrac says.

In Florida and Nevada, that percentage leaps to over 80%, according to analyst Thomas Vitlo of CoreLogic. Other states with high shares of condo cash sales, says CoreLogic:

State

Condo Cash Sales

Florida

81.2%

Nevada

80.5%

New York

79.5%

Alabama

75.7%

Arizona

65.7%

Those high figures surely reflect investor interest in condos as good rental properties (and investors pay cash): Generally lower-priced than homes, they also require less maintenance. And, condos often are the home of choice for downsizing Baby Boomers who are able to pay cash out of the sale proceeds of their last home.

The biggest factor, though, is availability of credit. As Vitlo explains, before the recession getting a mortgage to buy a condo was not a problem. You can see that in the numbers: Between 2000 and 2007, the average percentage of condos bought with cash in Florida and Nevada was 22.9% and 35.4%.

Tighter lending standards have made getting a condo loan incredibly difficult and not just because fewer people make enough money to qualify. The condo development itself might not qualify, under Federal Housing Administration rules put in place after the recession.

For borrowers to obtain FHA mortgages, the community has to pass an approval process documenting healthy finances, insurance, among other things. As of late May, 10,020 condo developments had received approval – a fraction of the roughly 158,000 communities around the U.S.

Condos are a “special hell,” says Keith Gumbinger of HSH Mortgage, because the buyer isn’t the only person responsible for property’s future condition—so is the association and even other tenants.

Cash, alas, is actually king. If you can cough up the cash, you may be able to negotiate a better deal because sellers don’t have to worry about financing falling through, either because you don’t qualify for the mortgage or the unit doesn’t appraise. Cash also means a faster closing time.

You’ll pay more. Because condos have historically higher default rates than homes, lenders will charge extra, Lucas says. That may be in the form of a fee – typically .75% of the loan amount – or a higher interest rate, say, 4.375% instead of 4.25%. You may avoid the charge if you can make a big down payment, above 25%.

Where you live matters too. No wonder everyone’s paying cash in Florida and Nevada. Many lenders charge extra for condos in those states. Plaza Home Mortgage, for example, charges a fee of 0.375% of the loan amount there; American Financial Resources charges 0.15% in nine states, including Georgia, Louisiana, Massachusetts, New Jersey and Utah.

There’s even more documents required. In addition to all that paperwork you have to fill out, the condo association will have to fill out a questionnaire asking for info such as “are there lawsuits pending?” The association also will have to supply a budget.

If you’re military, go VA. The Veterans Administration offers a zero down loan even on a condo. The condo developments also have to be approved in advance, though there’s a longer list than the FHA, Lucas says.

If you bought a foreclosure a year ago you probably overpaid. Good news: The discounts are back.

Last year, if you went shopping for a bargain foreclosed home, chances are you were thwarted by investors – some of them Wall Street-backed firms with massive bank accounts – thrusting wads of cash at every decent under-$200,000 home in sight.

And, in fact, investors were buying up so many homes, so fast, they pushed prices of foreclosures past what they were worth, according to new data from RealtyTrac. For three months last summer, the average foreclosure sold at a premium to its market value.

Well, looks like it’s safe to go shopping again. As investors have pulled back on their buying, discounts on bank-owned homes have drifted up again this year to 7% in March, RealtyTrac says.

Source: RealtyTrac.

That’s good news for buyers willing to put in the effort on some renovations in exchange for a deal. After all, that’s the whole point of buying a foreclosure. Sure, it often needs work – maybe even a lot of work if it’s one of those “anger management” homes exited by a bank-hating owner – but if the subsequent gain in home value exceeds the cost of improvements you’ve just set yourself up for a nice profit whenever you sell.

Back in 2011, those discounts got as high as 15% (this is for bank-owned property listed on the open market, not foreclosures sold at courthouse auctions – those discounts are much steeper). Such values lured investors onto the scene seeking to tap increased rental demand.

Over the last year, institutional investors (defined generally as investors buying 10 or more properties) have cut back, though not in all markets. They’ve generally shifted out of boom-bust hotspots like Phoenix and southern California into more stable areas in the Midwest and South.

So too, the discounts vary by city. The best deals tend to be found in places where the number of foreclosures remain relatively high and economies are struggling—Ohio, for example, and Rochester, N.Y. and Scranton, Pa. But they’re pretty juicy in some large metropolitan areas too, like 11% in Chicago, according to RealtyTrac data.

City

Discount

New York City

10%

Los Angeles

2%

Chicago

11%

Philadelphia

10%

Houston

21%

Washington, D.C.

2%

Miami/Ft. Lauderdale

5%

Atlanta

9%

San Francisco/Oakland

2%

Detroit

18%

Riverside, Calif.

4%

Phoenix

5%

Seattle

8%

Minneapolis

7%

San Diego

3%

St. Louis

21%

The trend toward bigger discounts, notes Chris Clothier, co-owner of Memphis Invest, may reflect the quality of the foreclosures now on the market: The more renovation they require, the higher discount they need to offer to attract buyers.

Plus, he says, more banks are making repairs themselves before putting them on the market. Such nicer properties might not even be listed officially as foreclosures and therefore wouldn’t show up in the numbers, Clothier says. “They’d rather fix them up and sell them at a higher price than take the steep discount,” he says. “You might be buying a foreclosure and you don’t know it.”

It’s certainly true that the number of foreclosures on the market has declined significantly, to 9.2% of sales in April, according to RealtyTrac, though it really does depend on the area. Take California, says vice president Daren Blomquist. Foreclosures are way down in hot markets like San Diego and Los Angeles, but in inland California cities (Modesto and Stockton) the percentage of sales that are bank-owned top 20%.

“Distressed property may be more rare, but you’re also buying in a housing market that’s improving and growing,” so it’s not as risky, Blomquist says. “Arguably the best time to buy a distressed property is in a market more like the one we’re entering right now.”

The Most Underwater Homes — That Aren’t in CA, FL, AZ or NV

It's not just the states hit hardest by the housing bust where homes are underwater, though it may seem that way from the stats.

It’s no surprise that lots of homeowners in the states hit hardest by the collapse of housing prices – California, Florida, Arizona and Nevada – don’t yet have enough equity to pay off their mortgage. That’s despite the healthy increase in home prices.

Where Are The Most Underwater Homes? These 13 Cities

Brian Jones—Las Vegas News BureauIn Las Vegas, 32% of homes are underwater. Sounds bad, but a year ago the figure was 47%.

Homes without enough equity to pay off the mortgage continue to plague the market, especially in the cities hit hard by the bust (basically, anywhere in Florida). The good news: There's way fewer of them than a year ago.

Home prices rose enough to put another 300,000 homes above water in the first quarter, according to CoreLogic. Over the last year, in fact, prices have bounced back enough to put a significant dent in the percentage of homeowners who don’t have enough home equity to pay off their mortgages.

As of March 30, 12.7% of all homes with a mortgage were upside down, compared with 20% a year ago.

And if prices rise just another 5%, as the research firm predicts, a year from now that share of underwater homes will be closer to 10%.

Still, the financial stability of American homeowners remains stubbornly fragile, reflecting just how painful the housing crash was. In addition to the roughly 6.3 million homes in negative equity, an additional 10 million have less than 20% equity.

Homeowners in that “under-equitied” position are less equipped to sell or refinance, because of lender requirements. Homeowners looking to trade up, for example, often need the proceeds from the sale of their current home to make a 20% down payment on a new one. A 20% down payment not only secures the best interest rates, it eliminates the need for costly mortgage insurance.

The depth of the underwater problem hurts potential buyers too, by keeping homes off the market amid general overall shortages of listings. First-timers are particularly impacted, because far more lower-priced homes are underwater than higher-end, according to Zillow research.

Where the water is deepest shouldn’t surprise: Nevada has the highest share of underwater properties (29.4%) followed by Florida (26.9%). After that comes Mississippi, Arizona and Illinois. Of the 25 largest regions, Tampa had the highest share at 29.5%. Still, that’s a nice improvement from 41% a year ago.

When looking at the largest 170, fellow Florida city Ocala takes the top spot with a remarkable 34.4% of homes in negative equity followed by Lakeland, Fla. (32.7%) and Las Vegas (31.8%).

The list below represents the highest percentage of underwater homes in cities with at least 200,000 mortgaged properties, according to CoreLogic.

Why Underwater Homeowners Are a First-Time Buyer’s Enemy #1

Dejan Stanisavljevic—Shutterstock17% of all homeowners with a mortgage owe more than their homes are worth.

17% of homeowners, and 30% of lower-priced homes, are underwater. That's keeping first-time home buyers from finding their dream home.

Home sales picked up a bit in April after a slow, ugly winter, but compared to last year they’re pretty sluggish. They’re trending down 7%, according to the latest from the National Association of Realtors. What’s more, first-time home buyers are still missing from the market: Their share of purchases stayed flat from last year at 29%. Historically, four out of 10 buyers are first-timers, NAR reports.

What gives? It’s not just that aspiring buyers are having a hard time getting mortgages. In most of the country’s largest cities, there simply aren’t enough homes on the market to satisfy demand. One big culprit: The homes where owners still owe more than the house is worth–and so they can’t sell.

Even though prices have rebounded nicely in the last two years, 17% of all homeowners with a mortgage are underwater, according to data firm RealtyTrac. In fact, 241 counties representing a third of the country’s population have at least 20% of homes that are “seriously underwater”–mortgage debt is more than 25% higher than the home’s value. In 136 counties, it’s more than 25%, and the worst counties top 33%.

A homeowner who can’t pay off the mortgage without bringing cash to the closing table simply isn’t going to sell. Not only do they need to be able to settle with the bank, they also need to cover their own closing costs and sales expenses. Between a 5%-6% agent commission and closing costs, the owner has to be at least 10% above water, and that’s before they even consider putting money down on their next property.

This cycle hits first-time buyers the hardest, says Zillow chief economist Stan Humphries, because underwater homes tend to be the most affordable. About 30% of homeowners in the lowest price tier of homes were underwater in the first quarter, compared to 11% of homes in the highest third.

“It’s hard to overstate just how much of a drag on the housing market negative equity really is,” Humphries says. To make matters worse, the shortage of for-sale homes created by the underwater owners drives up prices, “which in turn makes those homes that are available that much less affordable.”

The low end of the market is where listings are fewest, according to Zillow research.